Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint

India needs strategic vision

India needs a vision spanning at least a decade if it is to cement its place in the world rather than being the perpetual laggard

M. Visvesvaraya was the visionary dewan of the erstwhile Mysore State. He was a great admirer of the industrial progress made by Japan after 1868. Visvesvaraya believed that the only way India could free itself from the clutches of mass poverty was through rapid industrialization. In 1934, he wrote out a 10-year plan that aimed to double Indian national income in a decade, at a time when the economy had been stagnant for several decades. The crux of his strategy was to treble the amount of capital invested in organized industry.

Japan had by 1960 managed to get back on its feet after the utter devastation of World War II. Hayato Ikeda had become prime minister in that year. He was asked what he planned to do. His answer was memorable: “Isn’t it all a matter of economic policy? I’ll go for income doubling." Ikeda pointed out that Japan was trying to do in two decades what it could not do in the eight decades preceding the war.

Deng Xiaoping took control of China in 1978 when the country was recovering from the insanities of the Mao era. Deng launched the programme of four modernizations to strengthen agriculture, industry, defence and technology. The final goal was a quadrupling of the size of the Chinese economy by the end of the century. He believed that global power would naturally follow from economic advance.

Malaysian premier Mahathir bin Mohamad outlined an ambitious plan in 1991—Wawasan 2020 or Vision 2020. He said Malaysia should try to become a developed country by 2020. He outlined nine strategic goals that Malaysia would have to pursue. The key to success was to grow the economy eightfold over the next three decades in terms of the local currency.

There are a few common themes in these initiatives. One, their horizon was far beyond the term of any one government. Two, there was a clear sense of strategic purpose that could be communicated to citizens. Three, rapid economic growth was at the heart of these national vision documents.

There is a good reason why these seemingly disparate initiatives spread over the decades have been mentioned here. Narendra Modi has been swept to power on the basis of a campaign that has projected him as a visionary leader while his strong parliamentary majority could free him from the sort of pressures that have bogged down previous coalition governments. India needs a national strategic vision spanning at least a decade if it is to cement its place in the world rather than being the perpetual laggard.

India has not done badly since 1991, when Manmohan Singh eloquently finished his budget speech with the statement that the emergence of India as a major economic power was an idea whose time had come. The size of the national economy has increased more than seven times in dollar terms while average income is five times larger in dollar terms. Yet, India is still far away from providing citizens that sort of living standards that are increasingly common across Asia. The World Bank now defines India as a lower middle-income country but we are at 145 in the league tables based on per capita income: between Yemen and Zambia.

The big question that the strategists of the next government should be asking themselves is what needs to be done to create the conditions for at least another fivefold increase in average Indian incomes over the next 25 years. Remember that such an advance will only take us as far as where countries such as Bulgaria or South Africa are today—and still below the current global average of around $10,000. Accelerated growth is the best way out, to provide a growing population an escape from poverty as well as to provide the government with ample revenues to provide public goods. That is the unquestionable lesson from around the world.

The task before India in the coming decades is complicated—economic reforms to accelerate growth, creating attractive job opportunities for the millions entering the work force, attacking problems such as rampant malnutrition that have not receded despite rising incomes, replacing our crumbling infrastructure with national assets that will make lives easier, creating cities that can absorb citizens in search of new opportunities and addressing binding constraints such as energy, water, land and environmental stress.

Much of the immediate attention will quite naturally be on what the new Modi government does in response to more immediate economic problems such as high inflation, a terrible business climate, shelved projects, a weak banking sector and a high fiscal deficit.

In short, he has inherited an economic mess. However, the new prime minister should not lose sight of the fact that there are longer term challenges to be addressed. It will require political vision and clear strategic thinking.

Niranjan Rajadhyaksha is executive editor of Mint.Comments are welcome at cafeeconomics@livemint.com.

To read Niranjan Rajadhyaksha’s previous columns, go to www.livemint.com/cafeeconomics

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